Voice Control

Voice Recognition Software Business Plan

Financial Plan

Substantial funding is required to execute this business plan. The tables shown in the sections to follow, and in the appendix, detail the investment and use of capital.

September thru December 2002 - Funding will be required to allow the company to begin operation, complete their acquisition, hire staff, develop technology, purchase additional computer equipment needs, and fund marketing campaigns.

January thru August 2003 - Further funding will be required to allow the company to complete expansion of staff, complete beta testing, fund marketing campaigns and purchase computer equipment needs.

September 2003 - An additional infusion will be required to satisfy our capital needs.

7.1 Important Assumptions

FACTSThe orthopedic screening products currently do not have synergies with our core products being developed. It is being maintained to provide exposure to our current market interests and it provides necessary positive cash flow during the early stage of start-up. We may divest these offerings after positive cash flow is maintained from our core software.

Many of the orthopedist visiting our exhibit at the American Academy of Orthopedics annual meeting and American Society of Cataract and Refractive Surgeons annual meeting in 1999 and 2000, reported interest in electronic medical records. The majority said they had interest in a package that would employ speech recognition. Most said they wanted to be updated as developments were available. In 2001 a survey was taken of visitors at our exhibit at the American Academy of Orthopedics. We found that 86% of the market would rather purchase on electronic medical records software package that was speech enabled.

Additional sales from current VRS customers are not figured in any of the revenue scenarios. (In other words once a physician has purchased the dictation product how many additional sales will office/partners purchase? These figures are not included in any of the revenue scenarios.)

The American Academy Orthopedics has 15,000 members in the United States. They claim this represents 95% of the Orthopedist in the country.

Clinitec International, Inc. is a unit within MicroMed Healthcare Information Systems, Inc., a diorthopedic of Quality Systems, Inc. They have approximately 300 users in various disciplines of medicine. Their pricing is $20,000 per practice for the license rights to the software, plus $7000 per physician, per practice using the software. In addition, they charge 18% of this initial fee as a yearly maintenance fee. There are additional charges for hardware and training.

Billed as a follow up to the 1999 Institute of Medicine (IOM) report that documents nearly 100,000 patient deaths a year from medical errors, today the IOM issued a new report focused on system-wide concerns with health-care delivery. The report also points to Congress to create a $1 billion innovation fund to help support promising projects for health-care reform, and calls for elimination of most handwritten clinical data and development of a nationwide technology-based information network, (source: American Academy of Orthopedics, Washington Report, Volume VI, Issue 4, March 1, 2001.)

At the American Academy of Orthopedics annual meeting in New Orleans, November 2001, we asked visitors to our exhibit to respond to a survey about electronic medical records. We found that 91% of the market currently does not use electronic medical records.

At the American Academy of Orthopedics annual meeting in New Orleans, November 2001, we asked visitors to our exhibit to respond to a survey about electronic medical records. When asked their purchase plans the following was revealed: 38% plan to purchase within the next 18 months; 35% plan to purchase within the next 36 months; and 16% plan to purchase within the next 5 years.

ASSUMPTIONSOf the 15,000 orthopedist in United States, we make the assumption that there is an average of three per practice. This assumption is based upon a survey we performed from physicians that have attended our trade exhibits over the past three years. The data demonstrated that there was an average of 2.8 physicians per practice. This represents a total market size of 5,000 offices. The average selling price estimate would be $42,500, ($20,000 base price and $7,500 per orthopedist). 5,000 offices at an average selling price of $42,500 = $212.5 million.

The yearly recurring maintenance fee is 18%. The recurring maintenance revenue was based on 15,000 practices with an average of three physicians per practice, purchasing software at an average selling price of $42,500.

Current electronic medical records packages will attempt to utilize speech recognition software in the near future. Extensive knowledge and usage of speech recognition software will not be their strength. The opportunity exits to "brand" our technology into their product offerings.

Regular orthopedic sales will continue to decline approximately 13% per year without new products, based on past performance.

At the end of 2003, or sometime during that time period, our number of demos should increase due to increased awareness and use of technology.

Every new employee will require a new computer at the cost of $2,500 (monitor, and CPU. Each CPU will have a fax modem, zip drive, CD ROM and current specs show 512 MB RAM). The anticipated software for each system will be approximately $1,000 of the total price.

We will share existing printers, from the network. Therefore, additional printers needed will be minimum year to year.

A new phone system will be needed in the year 2005.

Every other year, new computers will need to be purchased for everyone, with the exception of accounting, to keep up with a technology relative to our core software.

Our closing rate will increase as we gain market penetration and word-of-mouth sales.

Bank finance charges are figured on credit card charges for 90% of VRS sales and 90% of orthopedic sales. The credit card charge is figured at 1.5%.

Revenue from electronic medical records sales will NOT be on credit cards. We believe these sales will be paid for from bank financing arranged by the individual physicians, OR through lease companies provided by us. It is not our intent to provide financing for these sales. A 20% to 25% deposit will be required with the balance due prior to final shipment.

General Assumptions

Year 1

Year 2

Year 3

Year 4

Year 5

Plan Month

1

2

3

4

5

Current Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

10.00%

10.00%

Tax Rate

25.00%

25.00%

25.00%

25.00%

25.00%

Other

0

0

0

0

0

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7.2 Projected Profit and Loss

The company is projected to reach profitability in FY 2005. The gross margin for this type of company is very different from a manufacturing facility. According to the IRS the cost of software development is depreciated over a three year period. The only cost of goods are the CD the software is burned on to, the printed instruction manual, and the runtime license for the speech recognition software. This produces an extremely high gross margin, but is accurate for this type of business. Companies like Microsoft, Peachtree, Corel, etc., will mirror unusually higher gross margins, when compared to typical manufacturing industries.

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7.4 Projected Balance Sheet

The following chart and table are the projected Balance Sheet for Voice Control, Inc.

Pro Forma Balance Sheet

Year 1

Year 2

Year 3

Year 4

Year 5

Assets

Current Assets

Cash

$464,719

$291,989

$47,153

$2,290,181

$7,673,863

Accounts Receivable

$46,500

$454,841

$790,753

$2,527,501

$4,155,807

Inventory

$10,384

$18,048

$29,464

$94,176

$154,848

Other Current Assets

$30,000

$30,000

$30,000

$30,000

$30,000

Total Current Assets

$551,603

$794,879

$897,369

$4,941,858

$12,014,518

Long-term Assets

Long-term Assets

$465,000

$508,000

$630,500

$735,500

$1,000,500

Accumulated Depreciation

$105,822

$267,422

$453,522

$573,817

$708,917

Total Long-term Assets

$359,178

$240,578

$176,978

$161,683

$291,583

Total Assets

$910,781

$1,035,457

$1,074,347

$5,103,541

$12,306,101

Liabilities and Capital

Year 1

Year 2

Year 3

Year 4

Year 5

Current Liabilities

Accounts Payable

$81,647

$119,925

$187,376

$522,034

$823,159

Current Borrowing

$84,094

$268,872

$252,055

$233,477

$214,587

Other Current Liabilities

$0

$0

$0

$0

$0

Subtotal Current Liabilities

$165,741

$388,797

$439,431

$755,511

$1,037,746

Long-term Liabilities

$0

$0

$0

$0

$0

Total Liabilities

$165,741

$388,797

$439,431

$755,511

$1,037,746

Paid-in Capital

$2,234,000

$2,234,000

$2,234,000

$2,234,000

$2,234,000

Retained Earnings

($146,366)

($1,488,960)

($1,587,340)

($1,599,084)

$2,114,030

Earnings

($1,342,594)

($98,380)

($11,743)

$3,713,114

$6,920,325

Total Capital

$745,040

$646,660

$634,916

$4,348,030

$11,268,355

Total Liabilities and Capital

$910,781

$1,035,457

$1,074,347

$5,103,541

$12,306,101

Net Worth

$745,040

$646,660

$634,916

$4,348,030

$11,268,355

7.5 Business Ratios

The software industry ratio statistics have not been easy to obtain. As mentioned before, the cost of goods for this type of company is extremely low. Basically, we will have our runtime license for the speech recognition software, a CD and printed instruction material, (the instruction material may also be incorporated into the CD.) Companies like Microsoft, Peachtree, etc., traditionally will have low cost of goods and high gross margins as a result. We used NAICS code 541511, Custom Computer Programming Services, as a rough comparison.

Ratio Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

Industry Profile

Sales Growth

0.00%

878.15%

73.85%

219.63%

64.42%

10.70%

Percent of Total Assets

Accounts Receivable

5.11%

43.93%

73.60%

49.52%

33.77%

26.43%

Inventory

1.14%

1.74%

2.74%

1.85%

1.26%

4.70%

Other Current Assets

3.29%

2.90%

2.79%

0.59%

0.24%

40.37%

Total Current Assets

60.56%

76.77%

83.53%

96.83%

97.63%

71.50%

Long-term Assets

39.44%

23.23%

16.47%

3.17%

2.37%

28.50%

Total Assets

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

Current Liabilities

18.20%

37.55%

40.90%

14.80%

8.43%

38.17%

Long-term Liabilities

0.00%

0.00%

0.00%

0.00%

0.00%

19.44%

Total Liabilities

18.20%

37.55%

40.90%

14.80%

8.43%

57.61%

Net Worth

81.80%

62.45%

59.10%

85.20%

91.57%

42.39%

Percent of Sales

Sales

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

Gross Margin

63.56%

93.53%

93.43%

95.61%

96.03%

100.00%

Selling, General & Administrative Expenses

607.12%

97.60%

93.70%

67.95%

64.68%

84.53%

Advertising Expenses

141.70%

14.49%

8.33%

2.98%

2.04%

1.06%

Profit Before Interest and Taxes

-541.80%

-3.34%

0.34%

37.06%

41.90%

1.55%

Main Ratios

Current

3.33

2.04

2.04

6.54

11.58

1.49

Quick

3.27

2.00

1.98

6.42

11.43

1.17

Total Debt to Total Assets

18.20%

37.55%

40.90%

14.80%

8.43%

66.93%

Pre-tax Return on Net Worth

-180.20%

-15.21%

-1.85%

113.86%

81.89%

3.01%

Pre-tax Return on Assets

-147.41%

-9.50%

-1.09%

97.01%

74.98%

9.11%

Additional Ratios

Year 1

Year 2

Year 3

Year 4

Year 5

Net Profit Margin

-543.56%

-4.07%

-0.28%

27.66%

31.35%

n.a

Return on Equity

-180.20%

-15.21%

-1.85%

85.40%

61.41%

n.a

Activity Ratios

Accounts Receivable Turnover

5.31

5.31

5.31

5.31

5.31

n.a

Collection Days

57

38

54

45

55

n.a

Inventory Turnover

10.91

11.00

10.75

8.53

6.20

n.a

Accounts Payable Turnover

11.61

12.17

12.17

12.17

12.17

n.a

Payment Days

27

25

25

20

25

n.a

Total Asset Turnover

0.27

2.33

3.91

2.63

1.79

n.a

Debt Ratios

Debt to Net Worth

0.22

0.60

0.69

0.17

0.09

n.a

Current Liab. to Liab.

1.00

1.00

1.00

1.00

1.00

n.a

Liquidity Ratios

Net Working Capital

$385,862

$406,082

$457,938

$4,186,347

$10,976,772

n.a

Interest Coverage

-307.42

-4.57

0.55

204.93

412.87

n.a

Additional Ratios

Assets to Sales

3.69

0.43

0.26

0.38

0.56

n.a

Current Debt/Total Assets

18%

38%

41%

15%

8%

n.a

Acid Test

2.98

0.83

0.18

3.07

7.42

n.a

Sales/Net Worth

0.33

3.74

6.62

3.09

1.96

n.a

Dividend Payout

0.00

0.00

0.00

0.00

0.00

n.a

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7.6 Exit Strategy

Beginning in the fifth year of the plan, significant cash reserves will have been established. It is anticipated that the fifth year of the plan will provide the opportunity for the owners to begin buying back the shares of the company required to fund the start-up. The owners currently desire to buy back all outstanding shares during this year.

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Voice Control voice recognition software business plan financial plan. Voice Control, Inc. was created to provide services relating to the input of patient data into a medical records database for orthopedic surgeons, including a voice recognition software database appli